If the reserve ratio for all banks is 12.5 percent,then $1,000 of additional reserves can create up to

Name: If the reserve ratio for all banks is 12.5 percent,then $1,000 of additional reserves can create up to
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Quizplus · Accepted Answer

The money multiplier is derived by dividing 1 by the reserve ratio. In this case, the reserve ratio is 0.125, so the money multiplier is 1/0.125=8. Therefore, $1,000 of additional reserves can create up to $8,000 of new money.

If the Reserve Ratio for All Banks Is 12